Web host accuses WordPress founder of extortion attempt of millions of dollars in trademark licensing fees

SAN FRANCISCO (CN) — WPEngine, a tech company that builds plugins and hosts websites built on WordPress, argued Tuesday morning to keep Automattic CEO and WordPress co-founder Matt Mullenweg from interfering with the site’s operations after he demanded tens of millions of dollars in exchange for WPEngine to continue using the WordPress trademark.

Mullenweg initially owned the WordPress source code and trademark and now also runs Automattic — which owns and operates several for-profit businesses that operate within the WordPress ecosystem and compete with WPEngine, including wordpress.com, WordPress VIP and Pressable.com, as well as WooCommerce, Inc.

Automattic has said that WPEngine’s use of the WordPress brand confuses customers into believing that WPEngine is a part of WordPress.

In a complaint filed in September, WPEngine claims that Automattic gave WPEngine five hours to pay the multimillion-dollar licensing fee or be blocked from using essential services that WPEngine needs to service its customers. When it didn’t pay the fee, Automattic blocked WPEngine, breaking thousands of its customers’ websites.

At a preliminary injunction hearing Tuesday, Rachel Kassabian, counsel for WPEngine, said that in late September Automattic engaged in a self-proclaimed “nuclear war” after WPEngine balked at paying the price for a trademark license it does not need.

WPEngine claims that its use of the WordPress trademark is fair use because WordPress technology is open source and free, and that in 2010, Automattic transferred the WordPress source code and trademark into the nonprofit WordPress Foundation to ensure that the name was fully independent from any company.

U.S. District Judge Araceli Martinez-Olguin, a Joe Biden appointee, asked Kassabian what right WPEngine had to use the WordPress trademark without paying a licensing fee.

Kassabian said WPEngine has been using the WordPress trademark for 15 years, protected by fair use.

“In the record, we have the long-standing use of the mark with absolutely no effort to enforce or even a complaint of any kind,” she said.

Between Sept. 20 and Sept. 25, Kassabian said that Mullenweg repeatedly smeared WPEngine in posts online, including one where he declared WPEngine was a “cancer to WordPress.”

“You look at the record, we see that for 15 years WPEngine was making nominative fair use of the WordPress mark, as the entire community did for 15 years, without so much as a shoulder tap. Nothing whatsoever until the morning of September 20, when we receive this one-page, bizarre trademark license agreement. That’s not how trademark owners operate, that is not how you protect and force your mark,” Kassabian said.

Kassabian said that Mullenweg came up with the multimillion-dollar price tag for the license personally, and specifically set the price so high because he knew that WPEngine had the funds to pay it.

Anna Shaw, counsel for Automattic, said that WPEngine’s complaint lacked credibility.

“I think it is notable that on the eve of their filing of the complaint, plaintiffs did a cleanup job on their website to delete numerous references to the WordPress and WooCommerce trademarks, including references that appeared in product names, which is a violation of the WordPress trademark policy,” Shaw said.

Shaw told Martinez-Olguin that ruling in WPEngine’s favor opens a slippery slope.

“Essentially any demand letter sent out by any trademark owner, the recipient of that letter could potentially argue that it is a claim of extortion if they disagree with the merits of that particular demand,” Shaw said.

Shaw also argued that WPEngine needed to show it had some preexisting right to use the WordPress trademark, and that it cannot point to any contract or other obligation or agreement to prove it had that right.

On rebuttal, Kassabian said that WPEnginge has had to use workarounds to continue providing its service to customers and that it is suffering ongoing losses of customers, market share, its reputation and more.

“I think the evidence is overwhelming on causation,” Kassabian said.

At the end of the hearing Martinez-Olguin said that she was inclined to grant some type of injunction, but that the request for relief for Automattic and Mullenweg to be blocked from interfering with WPEngine’s access to WordPress resources at this point was too vague.

Kassabian answered that she would be happy to narrow the request for relief, and promised that she would submit a narrower proposal for relief by Wednesday because of the urgency of the matter, though Martinez-Olguin gave her a deadline of Monday, Dec. 2 to do so because of the Thanksgiving holiday.

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